City Government

New Subway Projects And Their Benefits

The New York City subway, which celebrates its 100th anniversary next year, was built to provide faster and less crowded transit service than the street cars they replaced, and thus to open new areas of the city for development. One hundred years later, the next generation of proposed new subway lines embraces very similar goals. The proposed Second Avenue subway, for example, is intended to relieve severe overcrowding on the Lexington Avenue subway and create faster, more direct travel options from the Upper East Side to Sixth Avenue in Midtown. East Side Access, which will bring Long Island Rail Road trains into Grand Central Terminal, will shorten the commute for thousands of LIRR riders who work near Grand Central. The proposed extension of the #7 subway line in Manhattan would spur office and residential development on the Far West Side.

While these and other big-ticket transit projects have many benefits, the
city clearly cannot afford all of them and must thus decide on priorities. Unfortunately,
comparing the relative merits of different projects is no easy task. A
new report released by the Partnership for New York
City, a prominent business
group, takes up the daunting challenge of estimating the costs and benefits
of seven major Manhattan-oriented transit projects. The results of the report, "Transportation
Choices and the Future of the New York City Economy," are surprising, provocative
and hotly debated.

The partnership report focuses on two types of benefits - transportation benefits and economic development benefits. Transportation benefits are based on the value of savings in personal travel time, waiting and walk times, changes in the number of transfers and reduction in overcrowding and congestion. Time savings are translated into dollars based on the value of the saved time to travelers.

The partnership report tallies economic benefits based on the value of new office and residential space constructed as a result of better transit accessibility and increases in property values, jobs, incomes, retail sales and tourism.

The value of transportation and economic development benefits are then compared with the cost of constructing the project. The table below summarizes benefits as a percentage of costs, a standard way of comparing projects.

* Projects include only benefits to New York, not New Jersey.
Source: NYC Partnership

The most striking aspect of this table is that economic benefits are far larger than transportation benefits for most of the projects. Of course, the two are closely related; faster and more comfortable commutes to work make the city a more attractive place for employers and employees. But these results suggest that the economic benefits of transit projects should be weighed at least as heavily as the transportation benefits. The partnership, reflecting its business orientation, thus brings to the fore the question of which transit projects generate the greatest economic development "bang for the buck."

At the top of the list are the Farley/Penn project, which expands the existing overcrowded Penn Station into the Farley Post Office building; extension of the #7 train to Manhattan's West Side; and the Fulton Street Hub in lower Manhattan, which will connect PATH trains to subway trains and try to rationalize the tangle of subway lines at Fulton Street. Each of these three projects returns five to nine times its cost in economic development benefits and one-half to 1.36 times its costs in transportation benefits, according to the partnership report.

Of these three projects, the most attention has focused on the #7 extension because financing for the Fulton Street Hub and Farley/Penn projects is essentially in place. Indeed, the partnership report recommends building the #7 line extension "because it will generate significant economic development benefits and is essential to the redevelopment of the Far West Side."

Another striking result is that the Second Avenue subway, long prized by transportation advocates as the number one priority for subway system expansion, comes out in fifth place on the list. According to the partnership report, the Second Avenue subway returns only 82 percent of its cost in economic benefits and only 55 percent of costs in transportation benefits.

These figures are relatively low in part because the Second Avenue subway is projected to take 17 years to complete. Given the long construction timetable, the partnership recommends consideration of phasing in the project. Much of the benefit of Second Avenue would be realized from the segment north of 63rd Street, which would allow trains to run down Second Avenue, then across 63rd Street and down Broadway in the center of the island. It may be possible to open this "stubway" segment while the rest of the line is under construction.

Not surprisingly, advocates of the Second Avenue subway are unhappy with the partnership report, which can be seen to undercut the case for federal funding of the project. The Regional Plan Association (RPA), a long-time proponent of the line, points out that the partnership report leaves out of its calculation certain benefits from Second Avenue such as environmental benefits of attracting auto users to transit and social equity considerations such as the Second Avenue subway's potential to spur economic activity in Harlem. The partnership report is thus not a complete cost/benefit analysis.

RPA also points out the "network" benefits of the Second Avenue subway. The concept of network benefits is that building one line adds to the overall subway system in ways that have impacts throughout the city. Ironically, some of the higher-ranked projects need the Second Avenue subway to be viable. For example, adding LIRR passengers to Grand Central will put additional strain on the Lexington Avenue subway line unless the Second Avenue is built. Likewise, extending the #7 will create additional demands on the Lex and Grand Central Terminal. The partnership report agrees that a full network analysis should be conducted and might yield different results than the report's project-specific analysis.

The biggest difference of opinion between the Partnership for New York City and Regional Plan Association lies in how each side values transportation and economic development benefits. The partnership report estimates that the benefit of Second Avenue in reduced travel time, reduced crowding and fewer transfers totals $0.97 billion annually. Taking into account the assumption that the line will not open for another 17 years, the report calculates the transportation benefits of Second Avenue over the next 50 years as only $8.4 billion, using a net present value methodology that discounts the value of future benefits and costs.

By contrast, the Regional Plan Association assumes that the line can be built in 12 years rather than 17 years. The association also calculates a somewhat higher annual transportation benefit of $1.26 billion instead of $0.97 billion. Transportation benefits thus total $12.8 billion over the next 50 years rather than $8.4 billion.

Using a higher assumption for the amount of office, retail and medical space that would be spurred by the Second Avenue subway, the association estimates $23.1 billion in economic development impacts compared with $12.6 billion in the partnership report.

Clearly, all of these calculations are highly sensitive to the assumptions used to calculate economic development and transportation benefits. Both the Partnership for New York City and the Regional Plan Association acknowledge that more work needs to be done to make the analysis more reliable.

Even though the numbers are somewhat rough, the staggering size of potential economic development from the #7 extension underscores the possible viability of new methods of financing development on the Far West Side. Daniel Doctoroff, deputy mayor for economic development and rebuilding, is leading the city's efforts to develop the Far West Side into a mixed use office and residential neighborhood and to prime this "Hudson Yards" development plan with a new football stadium that would help attract the Jets and the 2012 Olympics. According to the Daily News, Doctoroff believes that the project could conceivably be financed based on the incremental tax revenue from the development. The city is now seeking bids from investment banks to help finance $2 billion in development, some of which would go to the #7 extension.

The theory on the Far West Side is, in simple terms, build it, they will come, and the tax revenues from the development will pay for the project. If the theory holds for the Far West Side, tax increment financing might also be applied to other transit projects.

The final and most fundamental question raised by the report concerns the city's potential for economic growth and the role of transportation, office and housing development in bringing about the growth. Economic development experts have long viewed additional housing and transit capacity as prerequisites for long-term job growth in Manhattan. The fundamental question is not so much whether these are necessary prerequisites, but whether they are sufficient conditions for growth. Now that New York is the safest big city in the country - crime having been a major deterrent to growth a decade ago -- will better transportation accessibility and additional housing spur large increases in jobs and population?

The Partnership for New York City report highlights the importance of this question but is far from providing the definitive answer.

Bruce Schaller is Principal of Schaller Consulting, which provides research and analysis to government, business and non-profit groups seeking to identify and meet customer needs in the transportation sector. He is also a Visiting Scholar at the Center for Transportation Policy and Management at New York University.

Editor's Choice

The comments section is provided as a free service to our readers. Gotham Gazette's editors reserve the right to delete any comments. Some reasons why comments might get deleted: inappropriate or offensive content, off-topic remarks or spam.

The Place for New York Policy and politics

Gotham Gazette is published by Citizens Union Foundation and is made possible by support from the Robert Sterling Clark Foundation, the John S. and James L. Knight Foundation, the Altman Foundation,the Fund for the City of New York and donors to Citizens Union Foundation. Please consider supporting Citizens Union Foundation's public education programs. Critical early support to Gotham Gazette was provided by the Charles H. Revson Foundation, Rockefeller Brothers Fund and the Alfred P. Sloan Foundation.